Franchise Agreement

The franchise agreement is the legal document that establishes the conditions of the franchisee and franchisor relationship. Although there is no standard format for a Franchise Agreement, the contract should state clearly the following to the franchisee:

Royalties, fees and expected total investment. The agreement should specify a franchisee’s ongoing royalty and frequency.

Territorial rights. This clause states the designated territory and whether or not the franchisor has a right to open up a corporate store or another franchise right next to your store.

Franchisor commitments. The agreement should specify ongoing requirements by the franchisor for your royalty dollars such as ongoing training, frequency of support visits and its advertising commitments.

Duration of agreement. The length of the efficacy of the agreement depends on the franchise and industry. It typically is between 10 and 20 years.

Termination policy. The agreement should contain provisions with the specifics of franchise renewal and termination.

Selling rights. Franchisors typically have the right of first refusal or to buy back a franchise. If there is such a clause, a franchisee wants to make sure that if a franchisor buys your franchise back that they are required to match the best offer of any buyer you might have.

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Mr. Blue MauMau's my name and speaking on behalf of franchise buyers and owners in this patch of reef is my game. I'm a fish that sports glasses, a bow tie and a serious attitude of wanting to know the truth when it comes to anything about franchises.